Musk: confident to rationalize Tesla’s market value


Tesla CEO Elon Musk said on the after hours earnings call on Wednesday that the company has a “roadmap” that could rationalize its current market value of more than $800 billion and even reach $1 trillion in the future.
Tesla’s share price has soared nearly 700% in the past year and is now expected to price at 213 times earnings. Musk is now the world’s richest man with a net asset of more than $200 billion.
Musk’s “roadmap” is like this: assume that the company’s annual car sales will soon reach $50 billion to $60 billion (the company’s fourth quarter car sales were $9.31 billion, and said that future car deliveries will grow at an average annual rate of 50%). As Tesla’s autonomous driving technology continues to improve, these vehicles will become autonomous robot taxis, increasing usage from 12 hours a week to 60 hours a week. Tesla can charge extra for these robotic taxis to generate more revenue for each of the company’s cars. Basically, it’s like introducing software economics into the labor-intensive automotive industry.
Musk also announced that Tesla’s fully automated driving (FSD) software will be available as a subscription from the first quarter instead of a one-time surcharge of $10000, which will enable Tesla to start increasing regular revenue as it improves its autonomous driving technology.
Musk said that even if the utilization rate only doubled, the valuation of $1 trillion was reasonable.
“If you make $50 billion worth of cars, you get $50 billion in incremental profits, basically because of software,” Musk said According to the formula, a 20 times P / E ratio means a market capitalization of $1 trillion, “and the company is still in a high growth mode,” Musk said
Less than nine months ago, musk had a very different view of Tesla’s valuation. In a tweet last May 1, he said: “Tesla’s share price is too high.” The comment led to a 10% drop in Tesla’s share price. But since then, the company’s market value has soared by more than 450%.